6/18/2010 @ 11:20AM

Moody's Cuts BP Credit Rating

Following in the footsteps of fellow ratings agency Fitch, Moody’s Investors Services cut its credit rating on
BP
Friday, citing the ongoing uncertainty over the oil spill in the Gulf of Mexico.

The market held tough at first, but
BP
‘s American Depositary Receipts slipped 0.3%, or 8 cents, to $31.63, in New York Friday morning. Since Apr. 20, when the Deepwater Horizon rig exploded, BP’s ADRs have fallen 47.7%, representing a $90.3 billion loss in market capitalization.

The bond market didn’t stand up and take notice of BP’s woes until recently, but any weakness was not particularly exacerbated by the rating downgrades.

On Friday
Moody’s
cut its rating on long-term BP debt to Aa2, from A2 and unsecured Issuer Rating of BP Corp. North America to Baa1, from Aa3. The senior unsecured issuer rating of BP Finance PLC was cut to A3 from Aa3. On Tuesday Fitch Ratings cut its rating on BP’s credit for the second time in a month. (See “Fitch Takes Another Ax To BP’s Credit Rating.”)

Moody’s said the downgrade of the long-term ratings reflects the worsening impact expected from ongoing situation in the Gulf. “Moody’s updated assessment is that the spill will have a sustained negative impact on the group’s free cash flow generation and overall financial profile for a number of years,” the agency said.

Hayward’s appearance before Congress came a day after the Obama Administration and BP announced the creation of a $20 billion fund to account for spill damages, as well as suspension of the company’s dividend. (See “BP CFO: Dividend Cut ‘An Extraordinary Thing To Do’.”) On Tuesday lawmakers hauled in oil executives from other major firms, as well as the head of BP America, for a public rebuke.